Twitter’s 20 Month Interview: Twitter Acquires Summize

16 July 2008 Comments

The news was confirmed that Twitter did indeed acquire Summize today, but at first I was a little confused. Twitter just received $15 million and needs to ramp up quickly. There’s a team of 6 guys at Summize that just finished a 20 month “Twitter class project,” why not consider them qualified and hire them?

With Summize’s current knowledge of the product, and their ability to help Twitter with the recent iPhone 3G launch maintaining uptime, Summize seems like a perfect fit for Twitter. More companies should take after Twitter’s lead and start picking up all of these ancillary companies built on their services and gain not only the technology, but the great talent at the companies.

The 20 Month Twitter Interview

The actual deal is rumored to be strictly stock, with no cash changing hands. Does this sound familiar to you? When you join a new startup, don’t you typically receive stock options as a bonus?

Isn’t this acquisition merely a prolonged interview process? Summize was founded in November 2006, and after receiving $750k in funding, to merely stay afloat, 20 months later they’re acquired by their new-parent Twitter.

The Summize employees, being extreme Twitter fanboys were probably more than excited about joining the Twitter team, and judging by the limited acquisition costs, it seems like a great move on Twitter’s part, and possibly an explanation why they’ve been valued at $100 million.

Acquiring Startups for their Employees

Companies have long been interested in acquiring the best human capital, as the value isn’t in the technology, but rather the management team and engineers. Microsoft has admitted they are interested in Yahoo! for their engineers, and Steve Balmer has said the price per employee is more than justified if you include the current search business returns.

For smaller startups like yourself, this doesn’t seem like the most scalable or cost-effective practice. But, if you look at it more closely, you can see some significant savings in the process.

Twitter acquired 5 employees from Summize, and say each of them is making a healthy $100k (not uncommon in the Valley). If Twitter were to use a headhunter to 5 qualified employees on their own, they would end up ponying 20% to the headhunters, $20k per employee or over $100k in hiring costs.

By acquiring Summize, you get 5 employees for free, get them to show they’ve done something (resume builder), and they are already fully aware of your product meaning zero to no training period (more savings), and everyone feels good about themselves because everyone loves buying companies (besides Richard Gere in Pretty Woman).

Do you know any local startups in your area you can “acquire” and bring on the talented team? Working at a startup you want to have the best employees on your team, and you should be looking for an entrepreneurial spirit with each new hire, and what better way to do that then acquiring another startup?